Quantity Theory of Money

Quantity Theory of Money is an economic concept which proposes a good relationship between changes inside the money supply as well as the long-term price connected with goods. It states that increasing how much money in the financial system will eventually lead to an equal percentage rise inside the prices of product or service. The calculation of the quantity theory of money is based upon Fisher Equation: M*V = P*T; Where: M means money supply, V means velocity of money, P means average price level, T means volume of transactions in the economy.